The former Nvidia employee who the authorities contend supplied inside information about the chip maker’s earnings to a group of hedge fund traders and analysts has reached a settlement with securities regulators, the regulators said on Wednesday.
The information about Nvidia’s corporate earnings that the employee, Chris Choi, provided was eventually shared among a group of analysts and traders, including several who did not personally know Mr. Choi. Federal authorities contend the inside information about Nvidia and another technology company, Dell, enabled the ring of traders and analysts to generate nearly $70 million in illicit profits. As part of the settlement, Mr. Choi will be required to pay a $30,000 penalty.
The settlement between Mr. Choi and the Securities and Exchange Commission was announced a day after a federal appellate court considered an appeal filed by two former hedge fund traders who were convicted in 2012 of making trades on some of the inside information provided by Mr. Choi.
Lawyers for the traders, Anthony Chiasson and Todd Newman, had pointed out to the appellate court that the men were convicted of insider trading even though the former technology company employees who the authorities say provided the inside information were never charged with any wrongdoing. The lawyers for the two men also argued the trial judge erred in failing to instruct jurors to decide whether they knew that Mr. Choi and the other tipper, Rob Ray, from Dell, had received a personal benefit for passing on the information.
A 30-year-old United States Supreme Court case held that a person could be guilty of insider trading if he knew that the corporate insider leaking the information received some kind of benefit for passing it on.
The appellate court, which reserved judgment on the appeal, indicated that it was receptive to the argument posed by the former hedge fund traders.
The S.E.C., in settling with Mr. Choi, had charged the former accounting manager at Nvidia with tipping a friend with inside information about the company’s earnings in 2009 and 2010. The friend, Hyung Lim, shared that information with another friend, a trader, who then shared that information with analysts at other hedge funds including the ones where Mr. Chiasson and Mr. Newman worked.
Mr. Choi settled with the S.E.C. without admitting or denying the allegations The S.E.C. charges are civil; federal prosecutors have not filed criminal charges against Mr. Choi. His lawyer, Douglas Schneider, declined to comment on the settlement, which still requires court approval.
To date, neither the S.E.C. nor federal prosecutors have charged Mr. Ray with passing on inside information about earnings at Dell, the computer company.